Greg Mankiw's Blog

Random Observations for Students of Economics

Friday, December 30, 2016

Me at the ASSA

If you want to see me at the upcoming ASSA meeting
in Chicago, here is some relevant information.

I will be chairing a session on “Economic Issues
Facing the New President,” with talks from Jason Furman (Council of Economic Advisers), Glenn Hubbard
(Columbia University), Alan Krueger (Princeton University), and John Taylor
(Stanford University). The session is on Saturday, January 7, starting at 10:15
am in the Hyatt Regency Chicago, Grand Ballroom AB.

I will also be
introducing the new edition (the 8th) of my Principles text, which
has just published. You can meet me at the Cengage booth from 3 to 4 pm on
Friday, 2 to 2:30 pm on Saturday, and 9 to 9:30 am on Sunday. Feel free
to stop by and say hello.

Wednesday, December 21, 2016

Why Y?

A professor emails me:

My students have the pleasure to use your economics textbook. I have one question: where the symbol "Y" for GDP comes from? All the others, we could detect, such as NX , NCO, etc. My students are curious, and I could not give them a good answer.

My unsatisfying response:

To be honest, I don't know. It is an old convention to use Y to denote real GDP, and I am just following that. But I don't know where or why the convention began.

If anyone knows the history and reason for this notation, please email me.

Update 1: Several people email me that the usage goes back to the early Keynesians, which is certainly true. Others suggest that Y is the generic dependent variable, as in y=f(x), which seems an unlikely explanation to me. Still others point out that I is already used for investment, which is true but does not explain the choice of Y for income and output. Some say Y stands for "yield," which seems a useful mnemonic, but I have never seen that word used to describe GDP in a standard published source. So I still don't have a fully satisfying answer.

Update 2: One person writes:

Ithought it was well understood that 'Y' is the
symbol for real GDP because it is short for "Income" as in
"National Income."Since 'I'
is already used for other macroeconomic variables, we use the letter that is
phonemically or orthographically related to 'I,' namely 'Y' (which is known in
languages like French and Spanish as "Greek i").

Maybe this is the right answer, but one thing I am sure of is that this is not "well understood," at least not by readers of this blog, judging from the many other emails I received.Update 3: A Harvard student looks at the history:

The earliest
reference to GDP as "Y" I could find is Kalecki 1937. The first articles to formalize the IS-LM model (Hicks 1937, Harrod 1937, Meade 1937) all seem to refer to national income as "I" (for income), and Cobb Douglas (1928) calls it "P" (for production). I'd be curious to see if anyone can find an earlier reference to "Y" than
Kalecki 1937. It appears there as Y=f(I) (income as a function of
investment), which seems like a vote in favor of the y=f(x) argument (but
I agree that's not a very satisfying explanation).

Update 4: A reader directs me to an old letter from Keynes to Hicks (dated March 31, 1937). Keynes writes:

“On one point of detail. I regret that you use the symbol I for Income.
One has to choose, of course, between using it for income or investment. But
after trying both, I believe it is easier to use Y for income and I for
investment.”

Thursday, December 01, 2016

Josh Lerner

About Me

I am the Robert M. Beren Professor of Economics at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.